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Committee hears bill to exempt investor mortgages from some consumer fee and prepayment caps
Summary
House File 34‑37 would exempt business‑purpose (investment) mortgages from consumer‑oriented limits on financed lender fees and prepayment penalties while preserving protections for consumer loans; proponents said it helps small local investors compete; Legal Aid and proponents will refine language and the bill was laid over.
Representative Alan introduced House File 34‑37 on March 11, a bill to limit finance‑lender fee and prepayment‑penalty caps to consumer (owner‑occupied) mortgages and thereby allow business‑purpose (investment) mortgages to finance closing costs or agree to longer prepayment penalties.
Michael State, director of regulatory affairs for Rocket Mortgage, said the bill clarifies that the 5% cap on financed lender fees and the 42‑month/2% prepayment rules should continue to protect consumer mortgages but not restrict business‑purpose loans. "Prepayment penalties can be a beneficial tool for borrowers looking to obtain more favorable upfront pricing," State testified, and he said the change would align Minnesota with neighboring states.
Ronald Ellwood of Legal Aid thanked proponents for working with them and said Legal Aid will continue negotiating language "to ensure residential owner‑occupied homes are not jeopardized under certain circumstances." Members asked several technical questions about market effects and whether the reform would incentivize local investment versus large cash buyers. The committee laid the bill over to allow additional drafting and stakeholder work.
